Raising direct taxes to 50% could reduce poverty by 1 percentage point: Study
The study also found that poverty among the poorest households could fall by four percentage points from the current 37.2%
A study has found that increasing the share of direct taxes in Bangladesh's total revenue from the current 33% to 50% could reduce the overall headcount poverty rate by one percentage point.
According to the government's latest data, the current poverty rate stands at 18.7%.
The study, conducted by the United Nations High Commissioner for Human Rights (OHCHR) Mission in Bangladesh, also found that poverty among the poorest households could fall by four percentage points from the current 37.2%.
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According to the findings, raising direct taxes to the proposed level would boost workers' incomes by 2% and help reduce income inequality. Bangladesh's current Gini coefficient, a measure of income inequality, stands at 0.4999—close to the threshold of extreme inequality. If the share of direct taxes rises to 50%, it could drop to 0.490, indicating a modest but meaningful reduction in income disparity.
The results were presented on Wednesday at a programme titled "Taxation to Realize Economic, Social, and Cultural Rights in Bangladesh" held at a hotel in Gulshan, Dhaka.
Md Salay Mostafa, consultant of the OHCHR Mission in Bangladesh, presented the keynote paper, while government officials, experts, and other stakeholders attended the event.
Currently, one-third of Bangladesh's tax revenue comes from direct taxes, collected from higher-income individuals, while two-thirds come from indirect taxes, imposed on both the rich and the poor. Experts note that this heavy reliance on indirect taxes disproportionately burdens low-income households.
Professor Dr Sayema Haque Bidisha, pro-vice chancellor of the University of Dhaka, said, "Direct taxation is a tool for bringing down inequality, poverty, price levels, and even inflation."
Dr Muhammad Abdul Mazid, former chairman of the National Board of Revenue (NBR), emphasised the importance of automation to increase direct tax collection and called for the abolition of the so-called minimum tax, which is collected but not refundable.
The programme was conducted by Dr Zaidi Sattar, chairman of the Policy Research Institute (PRI), with speeches from NBR Chairman Abdur Rahman Khan and Huma Khan, Head of Mission of the OHCHR in Bangladesh, among others.
